Tuesday, 25 August 2009

Profits aren’t Everything, People Count Too!


      Regular readers will know that as well as creating value, one of the other ideas that underpin this blog is organisational capability, or just human capital.  This concept is about generating competitive advantage and profitability through the intangible value provided by an organisation’s people.  Using people not as resources but as sources of human capital to create value and profit.  But this only happens by putting people first.  By taking a human capital-centric view and developing this capital, knowing that the longer-term payback will be increased profit.

So, I was intrigued to receive information on a new book that I’ve included in my holiday reading: ‘Profits aren’t the only thing, they’re everything’ by George Cloutier.

The key idea of this book is pretty simply: small business owners need to focus obsessively, and exclusively, on profit, in order to stay in and grow their businesses.

Now this isn’t my focus, but I’m not going to argue with the statement.  I can quite see Alan Sugar on the Apprentice, or the BBC’s Dragons agreeing with the idea, and they’ve built up small businesses, not me.

But some of the consequences of this exclusive focus are highly controversial:

“Weekends are for work.”

“Trust no one…  Micromanaging is a good thing  (I’m proud that my employees still complain they can feel me breathing down their necks).”

“Sales people should have 100 percent of their compensation based on pay for performance”

Providing workers “written documents detailing what they failed to deliver..  We call it a ‘Deficiency Notice’.”

“Turnover is a good thing…  The biggest mistake owners make is trying to rehab employees.  Forget it.  Fire first and agonise later.”

“Teamwork is vastly overrated…  [It] simply doesn’t work in most small businesses.”


And I have to say I think these ideas are also quite daft.  The problem is Cloutier’s ideas about people:

“You’ve got to be a tyrant…  Let your employees fear and respect you first .”

“I want my employees to do what I say, not what they think.”

“Fear of not getting a paycheck was, is, and always will be the best motivator.”

“During office hours the only growth they should care about is the growth of your profits.”

“Their only stake in your company is making sure they meet or exceed your expectations is they can continue to collect a paycheck.  Trust is beside the point.”


And how about this paragraph:

“Two thirds of the business owners we met delegate important tasks, follow up randomly, and whine when their orders are ignored.  They think they should have over their duties because that’s what the HR seminars and management books tell them to do.  But what they’re not admitting to themselves is that delegating is just another word for shirking responsibility.”



It’s no wonder that later on in the book, Cloutier notes:

“I can’t get my people to do what I tell them to do – We hear this refrain over and over again from our clients”.


It’s no surprise that Cloutier’s clients are getting this response if they’re taking his advice!


Organisational capability really is more suited to more established and sizeable businesses (or public sector and voluntary organisations).  But smaller businesses absolutely aren’t going to benefit from behaving in the way that Cloutier suggests either.

This isn’t even about putting people first, but keeping some perspective and balance between different factors, as the balanced business scorecard suggests for example.  Cloutier suggests his clients:

“Ignore the human resource gurus who preach patience, calm, civility, and multiple warnings.”


I don’t think it’s about these things.  But I do suggest fairness, respect and a bit of humanity.

A good example of a more appropriate and intelligent approach in a smaller, or at least, fairly simple business is Timpson’s, which runs its business very successfully by putting employees and customers ahead of profits (thanks to MOK at the Innovation Beehive for link to this).

Overall though, I did enjoy reading the book.  A lot of the time, it reads like a sales brochure for the Cloutier’s consultancy, but them given his focus, it’s pretty clear why he’s written the book, so you’d be surprised it it didn’t.  But I liked the very frequent stories and anecdotes.  And I did note down a number of ideas relating to my own business (not dealing with companies who read this book and decide not to pay their vendors on time is one!).



Also see: my post on Whole Foods and Conscious Capitalism on Social Advantage (“profits should not be pursued – they ensue from working towards a higher purpose”).



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